From Ownership to Experience: Why IHCL’s Boutique Luxury Push Signals a New Phase for India’s Hotel Industry

Indian Hotels Company Ltd. (IHCL) is doubling down on its shift toward boutique luxury, wellness experiences and an asset-light business model as key pillars to drive profit margins and sustainable growth over the next several years, said Puneet Chhatwal, Managing Director and CEO of the hospitality major.

Chhatwal said IHCL's strategic direction aims to balance scale with higher-yield segments, reinforce profitability, and capitalise on changing guest preferences, especially in experiential travel and premium leisure destinations.

Asset-Light Pivot Strengthens Margins

During the last seven or eight years, IHCL has greatly decreased its dependence on physically owned assets. The asset-heavy portfolio of the company has dropped to approximately 75% down to almost 35% and the other portion constitutes management contracts, operating leases, and partnerships, which do not need capital commitments as much. The move has contributed to de-risking operations, increasing scalability, and providing industry-leading margins.

Company's MD and CEO Mr Puneet Chhatwal said this asset-light focus has allowed IHCL to expand its branded presence faster than through traditional ownership models alone, while maintaining profitability and flexibility in investment decisions.

Expansion Into Boutique Luxury and Wellness

A recent example of this strategy is IHCL’s ₹85-crore investment to acquire a controlling stake in Brij Hotels, a boutique luxury resort portfolio in destinations like Varanasi and Jawai. Chhatwal said that such an acquisition augments the presence of IHCL in high-yield luxury leisure travel markets without the need to make enormous proprietary investments.

The average room rates across the Brij portfolio range from ₹28,000 to ₹29,000. Some select properties also have a rent between ₹55,000 and ₹75,000 per night, justifying the high positioning and revenue generation ability of this segment.

IHCL has also ventured into the wellness tourism segment by acquiring the wellness retreat Atmantan, which aims at serving the high-end, holistic health seekers. Although wellness will continue to be more of a selective vertical in regard to scale, Chhatwal considers it to be a major differentiator and global ambassador of the brand, in line with the rising interest of consumers in longevity and integrative health.

Diverse Brand Portfolio and Growth Visibility

IHCL currently operates over 610 hotels and pipelines, spanning multiple market segments from mid-scale to luxury. The management emphasised that IHCL will not pursue scale for its own sake but will focus on strengthening core brands like Ginger, Vivanta, and Taj while selectively growing newer niche offerings.

The MD also highlighted that brands like Ginger and IHCL’s flight kitchen business are expected to contribute double-digit shares to topline growth over the next 18–24 months, while small luxury brands could contribute 7–12% of growth over a five-year horizon.

Margins, Capex and Financial Discipline

IHCL’s consolidated margins currently stand in the 30–33% range, with standalone margins above 40%, reflecting the profitability benefits of its asset-light model. Management expects to sustain consolidated margins above 33% even as it continues selective capital investment in owned properties such as airport hotels, Lakshadweep island resorts, and the Taj Bandstand project in Mumbai.

Over the next five years, IHCL plans capital expenditure of ₹7,000–₹10,000 crore, largely funded through internal accruals. The company’s return on capital employed (ROCE), currently above 17%, is projected to move toward the target of 20%, bolstered by strong cash flows and a near net-debt-free balance sheet.

The management believes that favourable demand-supply dynamics in Indian hospitality, along with IHCL’s diversified brand mix, should support sustained cash accumulation and disciplined growth without compromising financial flexibility.

Sources

Economic Times